Posts by Jon Pfeffer

Ad optimization, at its core, was always about effectively persuading human emotion. Those consumer habits, according to new research from the Columbia Business School, can be traced right down to individual digital footprint, helping “people overcome their human limitations.”

In new research entitled “Psychological Targeting as an Effective Approach to Digital Mass Persuasion” published in the Proceedings of the National Academy of Science, Assistant Professor of Business Management Sandra Matz’s team explores a new development in the idea of “personalized persuasion.” Thanks to the accessibility of our digital footprints, marketers can now tailor persuasive messages to a “person’s fundamental character traits and psychological needs.”

Professor Matz and her co-authors conducted three experiments in which they targeted over 3.5 million Facebook users based on “Likes,” then measured users’ reactions (i.e. “clicks” and “conversions”) to “persuasive appeals in the form of Facebook ads that either aligned with or ran counter to the users’ psychological profiles.”

In one experiment, the researchers customized online beauty retailer ads that targeted either introverts or extroverts, based on their unique Facebook Likes. The researchers found that “matching the content of persuasive messages to individuals’ psychological characteristics resulted in up to 40 percent more clicks and up to 50 percent more purchases than their mismatching or un-personalized messages.”

While psychological targeting certainly has many advantages when it comes to product positioning, it has the potential to be more insidious. On a more individual level, psychological targeting can easily be “used to exploit weaknesses in people’s character and persuade them to take action against their best interest,” such as Facebook users with psychological traits related to pathological or compulsive behaviors.

The authors actively embrace the numerous ethical questions that surround the application of psychological targeting:

“How do we as consumers and society at-large want to use this new technology? In what settings do we want to facilitate its application, and when do we want to restrict it? For which purposes should we use it, for which should we not? Under which agreements should we be allowed to implement it, and with which required degree of transparency?”

On the eve of the new House Tax Cuts and Jobs Act being passed by the U.S. Senate, Haas School of Business professor and Fisher Center for Real Estate & Urban Economics chairman Ken Rosen projected a slow end to the era of easy money, typified by “artificially” low interest rates and increased rates of home ownership, and a Bitcoin bubble, post-GOP tax plan. Don’t worry; you’ve still got time to get your ducks in a row.

Last month’s 40th Annual Real Estate & Economics Symposium was the site of Rosen’s annual economic forecast, titled “Peak Moment or Extra Innings?” While Rosen doesn’t foresee another recession on the horizon, he posited that the 9-year asset bubble that developed as a result of low interest rates “will come to an end when rates are normalized” in a couple more years.

When it comes to real estate, Rosen says industrial spaces are the hot ticket these days, due in no small part to the efforts of certain e-commerce titans—in fact, Amazon is credited with 60 percent of new warehouse construction. “Industrial is the new retail. There’s a big restructuring happening. Cannibalization is what we call it, and the cannibal lives in Seattle,” Rosen says.

Rosen says the new tax overhaul is expected to hit homeowners in California especially hard. “[The bill contains] a number of provisions that will hurt housing, including the property tax deduction limitation and limitations on mortgage interest deductions.”

The impacts of the bill extend to the larger California state economy, which is expected to take a “$38 billion bite from taxpayers if the state and local income tax deduction is eliminated.” Rosen explains that California will become “more tax disadvantaged relative to other states” as a result of the GOP plan and will accelerate “out-migration from California.”

Rachel O’Meara, Google Sales Executive, Leadership Coach, and Pause author, recently wrote for Harvard Business School‘s Harvard Business Review, offering six effective strategies to convince your current employer to help you develop new skills on the job.

Identify how you want to learn and grow. “Spend time honing in on exactly what you need. Write down what you want to learn and how you would grow from the experience you’ve identified. The more you can write down, the more aware and real your ideas become.”

Own it. “Rather than being embarrassed or nervous about asking for time to build an underdeveloped skill, own it as part of your commitment to becoming a better leader.”

Create your vision statement. “Visions are a great way to orient and stay on track before, during, and after your development work. In one sentence, answer the question: Who will I become as a result of this investment of my time and resources?”

Connect your goals or outcomes to what the business needs. “To get buy in to support your development, you have to connect…what specific skills or knowledge you can share from your training or experience. Are there issues at work that you could better resolve as a result of this training? In what ways will your company benefit from your improved performance, skills, or knowledge?”

Prep and practice. “Make a list of what is negotiable – things like timing, budget, and activity. When preparing for the conversation, think about what each person involved in making the decision has to gain. Do your homework and read up on your HR policies.”

Make your ask. “When you’re ready to sit down with your manager, don’t catch them off guard. Give them ample notice and consider adding it to the agenda for your next one-on-one meeting.”

O’Meara concludes: “There are three likely outcomes: getting what you’ve asked for, getting some of what you asked for, or getting a flat out “no.” By following these steps, you’ll increase the chances that you get a favorable outcome, but that’s not always the case. Even if you don’t get what you asked for, start thinking about ways you can reshape your request in the future.”

O’Neill, who is also the Faculty Director of UC Berkeley’s Executive Leadership Program, and the former Chief Innovation Officer of the U.S. Agency for International Development under President Obama, says that the “cognitive myopia” or narrow-mindedness that results from the sheer bombardment of sensory data flying at us every moment forces us to “rely heavily on our long-term memory to make decisions.”

O’Neill believes that these types of shortcuts—natural responses to over-stimulation—are where errors in judgment begin and “[sometimes] these decision-making errors can lead to catastrophic results,” she writes.

According to the article, “By blocking information that doesn’t fit with what we already know, or think we want to know, our brains enable us to make decisions quickly and efficiently. But often, we overlook key data deliberately or unconsciously.”

O’Neill cites governmental failures like pre-9/11 terrorist warnings the 2008 financial crisis, as well as industrial failures like the “taxi industry’s failure to recognize how smartphones could revolutionize ride-hailing services,” as well as “Uber’s belief that its treatment of workers and regulators would not impact its business reputation and growth.”

Many researchers and pundits are quick to point to big data to save the day but analytics have the potential to exacerbate narrow-mindedness if “statistics used to predict future events are based on past patterns.”

She points to an example where the state of Michigan discovered fraudulent claims for state unemployment insurance from a faulty big data algorithm and wrongfully terminated 20,000 human claims reps.

O’Neill writes, “If we don’t get the algorithms right, we’re setting ourselves up for failure.” Data notwithstanding, O’Neill says we need to take collective steps to reflect on our own unconscious biases.

O’Neill concludes, “Until everyone recognizes that we are all narrow-minded, we are not going to overcome it. And the remedies to the most pressing business problems or in government or in our own personal lives are going to require new innovative solutions.”

Yelp’s surprisingly durable platform continues to sway consumers’ decisions about who and where to patronize, with 163 million unique monthly visitors.

This is especially true with the advent of paid advertising that appears alongside search results. But what influence does it have on the production end? The Lehigh University College of Business and Economics recently discussed a new study that suggests “paid search advertising can be a profitable investment for small businesses.”

Despite the exponential growth of digital advertising in the past five years, research has uncovered that the effects are actually “limited for branded advertisers since consumers already know and intend to buy from the brand when they search.”

This fact sparked the imaginations of Lehigh economics professor Daisy Dai and Harvard Business School Administration professor Michael Luca who were both interested in understanding “the impact on small businesses whose names are less known and who may gain from an increase in visibility.”

The duo eventually found themselves at the helm of the “largest-scale search advertising experiment run on online platforms in terms of number of businesses involved.” Dai and Luca conducted an experiment in which they took a pool of 18,000 restaurants and randomly assigned free search advertising packages to 7,000 of them, most of which had “not actively advertised on Yelp prior to the experiment.”

According to the article, the researchers examined “page views of the business’ Yelp page, requests for directions, phone calls to the restaurants from Yelp’s mobile page or mobile app, and clicks on the restaurants’ URL on their Yelp page” and compared the “outcome of businesses that did or did not receive free advertising.” The experiment found that “Yelp advertising leads to a 25 percent increase in page views and a 9 to 18 percent increase in purchase intentions, such as direction requests, visits to the restaurant’s website and calls to the restaurant,” according to Dai.

Another insight was related to the number of Yelp reviews each business received, which grew by 5 percent, then “dropped to zero immediately after the advertising period, suggesting ads temporarily raised awareness of businesses that users otherwise would not discover.”

Dai concludes, “Our study finds that an average local restaurant can benefit from search advertising on Yelp. Unlike previous online advertising experiments that usually focus on a few big brands, we yield insights for small businesses.”

Raffaeli examined how, after a nearly two-decade-long plummet, independent bookstores staged an unprecedented comeback between 2009 and 2015 after “Amazon forced Borders out of business in 2011.” This was also due in no small part to the efforts of the American Booksellers Association (ABA), which facilitated “partnerships between bookstores and other local businesses and strengthened the collective identity of indie bookstores by helping its members share best practices, such as how to use social media to promote special events.”

Raffaeli explains, “This has been an especially fascinating industry to study because indie booksellers provide us with a story of hope.”

Over 200 bookstore owners, publishers, and authors across 13 states were surveyed and the results were consolidated into the “3 C’s of independent bookselling’s resurgence community, curation, and convening.”

Community: “Bookstore owners across the nation promoted the idea of consumers supporting their local communities by shopping at neighborhood businesses [and] stressing a strong connection to local community values.”

Curation: “Independent booksellers began to focus on curating inventory that allowed them to provide a more personal and specialized customer experience.”

Convening: “Independent bookstores have become intellectual centers for convening customers with likeminded interests—offering lectures, book signings, game nights, children’s story times, young adult reading groups, even birthday parties.”

“The theoretical and managerial lessons we can learn from independent bookstores have implications for a wide array of traditional brick-and-mortar businesses facing technological change.”